Vanguard has expanded its suite of socially responsible equity ETFs in Europe with the addition of two new funds targeting stocks from the developed Asia Pacific and emerging market universes.
Vanguard now offers five ESG-tailored equity ETFs in Europe.
The Vanguard ESG Developed Asia Pacific UCITS ETF (V3PA) and Vanguard ESG Emerging Markets UCITS ETF (V3MM) have been listed on London Stock Exchange, Deutsche Boerse Xetra, Borsa Italiana, Six Swiss Exchange, and Euronext Amsterdam.
The funds are designed to serve as core building blocks for ESG-aware portfolios, providing broad diversification while screening out undesirable issuers based on index provider FTSE Russell’s ‘Choice’ framework.
They may appeal to ethically minded investors who prefer the straightforward approach of excluding firms from controversial industries compared to some of the more complex, “over-engineered” ESG products on the market.
The Vanguard ESG Developed Asia Pacific UCITS ETF comes with an expense ratio of 0.17%, while the Vanguard ESG Emerging Markets UCITS ETF costs 0.24%.
Each fund is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).
The new listings complement Vanguard’s three existing ESG equity ETFs which deploy FTSE Russell’s Choice framework to stocks from global, developed North America, and developed Europe universes. They are the $190m Vanguard ESG Global All Cap UCITS ETF (V3AL), which comes with an expense ratio of 0.24%; the $10m Vanguard ESG North America All Cap UCITS ETF (V3NM), which has an expense ratio of 0.12%; and the $10m Vanguard ESG Developed Europe All Cap UCITS ETF (V3EL), which is also priced at 0.12%.
Methodology
The new ETFs’ underlying indices – the FTSE Developed Asia Pacific All Cap Choice Index and FTSE Emerging All Cap Choice Index – start with initial universes comprising large, mid, and small-cap stocks within their respective regions.
Companies that do not satisfy UN Global Compact principles relating to labour & human rights, environmental protection, and anti-corruption standards are excluded.
The indices also remove firms deriving significant revenue from non-renewable energy (coal, oil, or gas), nuclear power, adult entertainment, alcohol, tobacco, gambling, and weapons (controversial, military, and conventional).
Following these screening steps, the remaining constituents are weighted by market capitalization. Rebalancing occurs on a quarterly basis.